A southwestern Indiana banking corporation is fulfilling its expansion goal in the Columbus market by buying four branches in the city from a bank that has to sell them in order to complete a previously announced merger.
Jasper-based German American Bancorp announced Tuesday that it has agreed to buy five branches total from Greensburg-based MainSource Bank. They are:
- Columbus downtown, 529 Washington St.
- Columbus north, 1901 25th St.
- Columbus west, 2310 W. Jonathan Moore Pike
- Columbus drive-through, 803 Washington St.
- Greensburg Plaza, 304 E. 10th St.
About 25 MainSource employees, including about 20 in Columbus, will be affected as they will become employees of German American.
[sc:text-divider text-divider-title=”Story continues below gallery” ]
Approval from federal and state banking agencies is still needed for the deal to be finalized.
The sale is a requirement by the Department of Justice in order for MainSource and Cincinnati-based First Financial Bancorp to finalize a merger that was announced last year. A signed and approved deal with a buyer of the bank branches was required before the MainSource-First Financial merger could be completed. That merger, valued at $1 billion, is expected to close in the first quarter of this year.
Federal regulations regarding monopolies and competition set limits on the concentration of deposits by one banking company in one market. MainSource and First Financial each had four branches in Columbus when they announced the merger.
Appealing market
The purchase of the four Columbus banks is a great transaction for German American, said Mark Schroeder, the bank’s chairman and CEO.
“The (Columbus) market fits well with what we want to do for business, which is focusing on banking with locally owned businesses and municipalities,” he said.
A little more than 10 years ago, German American began a strategy of expanding into southern Indiana metropolitan statistical areas such as Evansville, Bloomington, Columbus and the Indiana side of the Greater Louisville metropolitan area, Schroeder said.
Either by starting branches from scratch or through acquisitions, German American has entered all those markets. It now has a presence in 19 Indiana counties and one northern Kentucky county.
The bank’s financial success has grown, too. Last year it broke its record for total net income, at $40.7 million.
German American has one office in Columbus, in the retail space of The Cole apartments building at 240 Jackson St. The branch opened in 2013.
The bank also owns a 1.03-acre property at 2737 Central Ave., the former Ahlemeyer Farms Old Time Bakery, where it had planned to build a second branch this year. That location is one-third of a mile from the 25th Street MainSource branch being acquired.
Schroeder said the Central Avenue bank branch building project will be put on hold, in light of the acquisition, and the property will be kept until a decision is made whether to build a branch or sell the land.
The Jasper-based bank has a presence in neighboring Jennings and Jackson counties, with branches at 220 N. State St. in North Vernon and 1725 E. Tipton St. in Seymour. The acquisition also establishes its presence in Decatur County.
Sale terms
The Columbus branches German American is purchasing had about $160 million in deposits and $134 million in loans as of Dec. 31.
“This transaction brings immediate income to our bottom line and is expected to be accretive to our earnings per share,” Schroeder said.
German American will pay a premium of 5 percent on the deposits, amounting to $8 million, to acquire the loans and deposits, and is purchasing the branch properties and equipment for MainSource’s book value of $6 million, Schroeder said.
In transactions such as this, the buyer and seller also work to balance assets and liabilities on their books, said Jamie Anderson, MainSource’s chief financial officer. The $134 million in loans are considered an asset and the $160 million in deposits a liability because they are other people’s money, he said.
To balance the $26 million difference, MainSource will send German American $12 million in cash on top of the $8 million premium and $6 million for the properties, Anderson said.
The agreement also includes a six-month “put-option” on the loans purchased, which allows German American to require that MainSource repurchase them within six months of the sale closing. Schroeder said loans that are considered out of German American’s area of business could be a reason for enacting the “put-option.”
MainSource marketed the branches to three banking companies, and focused on a deal that made sense and that could be completed quickly, said Archie Brown Jr., the bank’s chairman, president and CEO.
It was important for the buyer to be able to convert customers at the acquired branches to its network before MainSource branches were converted into the First Financial network, Brown said.
“This is a high-quality company and our employees should feel good about working for them,” Brown said of German American.
An agreement to purchase the branches was reached quickly compared to the normal process, Brown said, but that’s reflective of the attractiveness of the market.
“Columbus is a fantastic market to be in. We had a lot of interested parties call, but we focused on getting it done quickly,” Brown said.
[sc:pullout-title pullout-title=”About German American Bancorp” ][sc:pullout-text-begin]
German American Bancorp Inc. is a Jasper-based bank holding company. German American operates 53 banking offices in 19 southern Indiana counties, and one in northern Kentucky. It has branches in Columbus, North Vernon and Seymour. The company announced in January that its 2017 net income of $40.7 million was a record, and that its assets had increased to $3.144 billion. For more information, visit germanamerican.com
[sc:pullout-text-end]
